Sunday, March 29, 2009

Countdown to the G20

This is the top headline on Drudge right now, and it was the same last night when I went to bed. So the link is likely getting millions of visits:


Pat Fields on the Honestmoneyreport forum posted this notice regarding the above article earlier this morning. It is very interesting, though not terribly surprising.
Bias Times UK

Hi Folks,

It appears that the Times Online of the UK has an Orwellian Newspeak opinion editor hard at work to filter out public commentary on its articles when drawing too much attention to the basic problem of world finance, as having its real basis in paper money.

Over the past three hours, in response to 'Brown snubbed over tax - Germans wreck ‘global new deal’: http://www.timesonline.co.uk/tol/news/politics/G20/article5993184.ece I posted two separate mentions, suggesting that the world's governments should consider abandoning paper money in deference to Honest Money. While some 10 additional notes were added, neither of mine made the llist. Only those nebulously offering purely pro or con opinion on the political ramifications are shown.

Try your own attempt ... let's see what happens.

Pat

Pat's observation aside, this article is interesting in that it speaks to the widening gap between the dollar faction (Barack Obama and Gordon Brown) and the Euro faction (Germany, France, Spain, etc...).
The assault by European Union leaders also represents a defeat for President Barack Obama, who is desperate for other big economies to copy his $800 billion stimulus plan.

The US and UK who already have visible smoke pouring out of the proverbial printing presses they are running at a clip, desperately want the Eurozone to join in this orgy. But the Euro is resisting.
UK officials have not given up on the idea there could be agreement on a fresh boost for the world economy later in the year. “It is likely that there will be another heads of government meeting probably in Asia in the autumn,” said an official.

Fresh boost! Autumn is a long ways away.
There are growing fears that protests at the summit venue, the ExCeL centre in London’s Docklands could be marred by violence. Scotland Yard will be deploying specialist officers trained to use 50,000-volt Taser stun guns.

EconomicRot has some protest videos up. G20 Protests

Funny thing about the protesters. They want socialism. This isn't people like Pat Fields protesting. This is hard core socialists. And what they don't understand is that they are protesting against the greatest socialist shift of all time. Whether it's massive stimulus or massive printing (same thing really), it will lead to a massive socialist world-state and a redistribution of wealth from the savers to the spenders. But the banking sector's big salaries have drawn such ire that everyone is protesting simply to protest. It's quite funny if you think about it.

Did you see the sign, "How to keep warm at the protests... burn the bankers"? That really says it all. That is what these protests are really about.

Paper is already burning. Why not throw the bankers in too? Brown and Obama want to fight fire with fire, to keep the fire burning by throwing more fuel on it. The protesters think the bankers themselves will suffice.

Here are some comments that DID make it onto the article:
We in the US are fairly new at being socialist. Forgive us of our stumbles as we attempt to throw ourselves into the abyss that enslaves most of Europe. With Barrack at the helm, we too shall soon be totally reliant upon our government for happiness.

Erik, Miami, USA

Who are the countries who are most responsible for this mess. The US and the UK and their investment banks etc.
Why should the rest of the world go further in debt to solve problems caused by these two countries? They are the ones who benefited most by the excesses that led to this problem.

Tim, Toronto

Brown and the G20 leaders have missed the point. The G20 summit must focus on delinking economic growth from increased energy use. This in itself will give the economy a massive boost and take us out of the CO2 trajectory that will spell disaster for millions.

More of the same is no solution

Peter, London

Here are some headline samples from Mikal on USAGold:
New reserve currency idea needs work-German minister
Reuters - 03/29/2009

Obama Will Face a Defiant World on Foreign Visit
NY Times - 03/28/2009

Now the Long Run Looks Riskier, Too
NY Times - 03/29/2009

No Time For T-Bonds
Forbes - 03/28/2009

Optimism about U.S. banks might be misplaced
Reuters - 03/28/2009

Goldman Bailed Out 2 Executives
NY Times - 03/28/2009

Inflation looms over deflation risk
Financial Times - Chancellor - 03/29/2009

Stay tuned. This could be an interesting week.

FOFOA

_______________________________________________________

Addendum A:

I just saw this interview on the weekend edition of Glenn Beck. You probably saw my post on Wednesday of Daniel Hannan.
The devalued Prime Minister of a devalued Government

I found that video on Drudge, and at the time it had about 150,000 views. It now has 1.6 million views, not counting those people that saw the abbreviated version on TV. Anyway, going viral got this guy on the Glenn Beck show. Here it is...

19 comments:

FOFOA said...

Russia hints at gold in SDR basket

To this, Jim Sinclair says, "Interesting approach with gold added. It depends on how and how much. Otherwise, it is still a bag of paper."

FOFOA said...

Open letter to the G20 from LEAP/E2020

Anonymous said...

Great post FOFOA!

The truth is spreading like fire. With thanks to the internet, we could face the shift in pubic consciousness by the mid of April...

The objectives of Rusia & China (and others) are becomming cristal clear by the day.

Another said something 251097 "The big buyers fully well expect gold to stop all trading as the governements enact DRACONIAN MEASURES to deal with a worldwide currency problem"
Are we comming there yet....

Certainly this will be an interesting week !

Shanti

FOFOA said...

Hello Shanti,

You hit the nail right on the head! It is the Internet that is the key to understanding what is happening. The Internet is the new ingredient in this crisis. In the world of economies and currencies we must pay attention to the flow of real capital. In the world of public opinion and public confidence we must pay attention to the flow of THOUGHTS!

Yes. They are flowing now. And velocity is increasing. Perhaps we will see a 'hyperinflation' of THOUGHTS!

FOFOA

FOFOA said...

Shanti,

Good quote from Another. Here is that entire post for a little context. There are some good thoughts in here...

Date: Sat Oct 25 1997 10:24
ANOTHER (THOUGHTS!) ID#60253:

Why do the Swiss want to sell gold over many years when they could sell the entire lot in a week? Yes, the worldwide trading volume in gold could take the whole load and not drop the price below Fridays close! The reason for the "many long term selling announcements" is to keep the price down over time. The CBs would have you think that their selling would "crush the price"! The real effect would be exactly the opposite. The major world buyers would line up at the door to buy "the last sale of the century! Have you heard any CBs putting out "Proposals to Sell" for their entire stock of gold? Of course not, the response to buy would give off the absolute wrong signal and cause a revaluation of gold .

It is a far better use of a public asset when they use a small amount of it over time to ensure a reasonable price for OIL! If all gold was sold quickly, there would be no trading medium for deals! How far do you think an IOU would go if it didn't have gold in the background worth perhaps a 1,000 times it's current commodity price?

So what good is this information to the small investor? Not much if you run out and buy gold options, gold stocks, gold futures, etc.! Did you think the following quotes were good for those assets:

"That is why some "Big Traders" are holding ONLY gold as events unfold."

"One last note: No form of paper wealth will survive the financial crush once the CBs stop selling! NOTHING!"

"The market is changing now,,, it will go up but you will not be happy with the outcome."

"What is happening now is far, far larger than the interest of a few traders or mining companies. They will be stepped on!"

Gold bullion is being accumulated and cornered on a worldwide scale not seen before! UNDERSTAND THIS: The people who are buying do not expect the price to rise until the CBs slow their selling. They do expect the value of gold to increase in the future even as the banks sell into a rising market. This will happen as the sheer volume of trading completely overwhelms the entire worldwide market! The big buyers fully well expect gold to stop all trading as the governments enact DRACONIAN MEASURES to deal with a worldwide currency problem. The public in general will ask for these measures and to that effect, all paper connected to bullion will become "fair game"!

My projections and -----:

The gold market is not the same as it was in the past, so throw your charts and TA away! Nor will the gold market be the same in the future as it is today, so don't use paper substitutes! Today, gold is much more valuable than it has ever been! During your time a straight forward investment in "bullion only ' will far surpass any other asset you could hold!



I will also note a comment Jim Sinclair made today...

"Every cent of bailout funds lies latent in the economy in the hands of the new shadow trillionaires. These shadow trillionaires now have a serious problem. Their enormous wealth is all paper.

The bailout money in all these entities comes in the front door of the loser and goes immediately out the back door to the winner on the derivative. The firms identified as the winner is not the principle on the trade. It is the broker only. You will never know who the principle is, ever."



So these mystery recipients of all the bailout money are sitting on trillions of paper dollars that are about to go up in smoke.

Now think about all that money. Think about the problem facing the people holding that money. Think about "Draconian measures" and the upcoming G20 meeting, and read Another's words one more time...

Gold bullion is being accumulated and cornered on a worldwide scale not seen before! UNDERSTAND THIS: The people who are buying do not expect the price to rise until the CBs slow their selling. They do expect the value of gold to increase in the future even as the banks sell into a rising market. This will happen as the sheer volume of trading completely overwhelms the entire worldwide market! The big buyers fully well expect gold to stop all trading as the governments enact DRACONIAN MEASURES to deal with a worldwide currency problem. The public in general will ask for these measures and to that effect, all paper connected to bullion will become "fair game"!

FOFOA

FOFOA said...

Hot off the presses...

LONDON, March 29 (Reuters) - G20 leaders are expected to discuss using proceeds from planned gold sales by the International Monetary Fund (IMF) to double funding available for poor countries which need help dealing with the global economic crisis, a source familiar with the plan said on Sunday....

Just remember what Another said...

The reason for the "many long term selling announcements" is to keep the price down over time. The CBs would have you think that their selling would "crush the price"! The real effect would be exactly the opposite. The major world buyers would line up at the door to buy "the last sale of the century!

...as the banks sell into a rising market.

Mark said...

The public in general will ask for these measures
That is what is laughable (and infuriating) about the childish socialists banging their spoons on the high chairs. They are not the productive savers that will see their lives effort wiped out. They will demand their own destruction, will eagerly embrace a false shepherd, and will indeed reap the whirlwind. Students of history they're not.

FOFOA said...

Kinda like these guys?

FOFOA said...

I watched The Road Warrior tonight on Encore. It was a little disturbing. Haven't seen it in over 20 years. I don't remember it being disturbing back in the 80's.

Mark said...

Love that cartoon ;-)
Another film I saw a snippet of on YouTube that really hit me differently was "Cabaret". It was a little harsh to invoke in the context of the campaign (with little children singing praises to Obama, and the Obama 'Youth Corps', and Rahm Emanuel's vision for compulsory IDF-like service), but it was also instructive in the sense to always be vigilant.
Tomorrow Belongs To Me
Watch the sense of unease overtake the elderly gentleman. Oh yeah, and don't forget - 'Master Blaster' run Bartertown!

Martijn said...

G20 might indeed discuss gold sales:
http://www.mineweb.co.za/mineweb/view/mineweb/en/page34?oid=81036&sn=Detail

And Max Keiser says not to take China too seriously untill they own some gold:
http://www.youtube.com/watch?v=Si2vXUJyATE

Martijn said...

H. Bernanke has however stated that one of the tasks of the fed is to fight inflation.

"The agreement between the Fed and Treasury last week included a pledge that “in the longer term and as its authorities permit, the Treasury will seek to remove from the Federal Reserve’s balance sheet, or to liquidate” the assets the central bank has acquired from rescues of Bear Stearns Cos. and American International Group Inc.

To help raise rates when the time comes, the Fed wants the power to sell its own debt as a means of mopping up some of the funds it’s pumped into the economy."

http://www.bloomberg.com/apps/news?pid=20601068&sid=abuPwlNJSeis&refer=home

Would be interesting to see the fed sell it's own debt though.

FOFOA said...

Hi Martijn,

Yes, the Fed has big plans for how it will fight inflation once it begins. There are a few problems though.

A lot of the stuff the Fed took on its balance sheet will not sell into the market at prices anywhere near the values it was in early 2008 when it was used as collateral. Short term loans will become permanent unless and until the economy turns around. So the Fed will not have the political capital to force that money out of circulation anytime soon, even if we see something like hyperinflation. That kind of Fed action would just make the situation worse. So its really only a rhetorical tool for the Fed in the foreseeable future.

When the Fed sells anything, it receives money in return, and that is supposed to take money out of circulation, reducing the money supply. But all the Fed has been doing is buying buying buying, putting money out into the money supply. And now the Fed is buying the long end of the Tbond curve.

Karl Denninger claims that this Tbond buying can be sterilized by the Fed forcing Depository Institutions to keep the money they receive for Tbonds as excess reserves in the Fed vaults, restricting it from entering the economy. But Depository Institutions only make up $107 billion of the $trillions in Tbonds floating out in the world. And that's only a third of the $300 billion the Fed has already pledged. This sterilization does not work for private or foreign and sovereign holders of Tbonds that want to sell into the Fed's bid. And it does not work for new issue Tbonds, because the Government is going to run out and spend the new money into the economy as soon as it gets it.

The Fed knows that it literally has nothing of real value left to sell in order to take money out of the economy. So what's left? The Fed wants to create its own debt, its own bonds to sell. But who will buy them?

A government can sell debt because it has the power to tax its people in the future. That is what a government is selling a piece of. A private company can sell debt based on its future profits. But the Fed doesn't have the ability to tax, so it is only selling debt against its future printing ability. Who is going to buy that? It makes no sense at all. And why would the Treasury let them do it? The Fed would literally be COMPETING against Treasury bonds for the limited capital in the markets. The Treasury is struggling so it will never let the Fed do this. Again, it is only a rhetorical tool.

Jim Sinclair keeps driving the point home that hyperinflation is a currency event, not an economic event. It is a currency event in that it happens when confidence is lost in a currency. It is not an economic event as normal inflation is. Normal inflation is driven by an expanding economy. And an expanding economy is the ONLY situation in which it makes any sense for the Fed to do what it says.

In order to take money out of the economy, someone needs to sell something, something of value that people will actually pay for, and then essentially burn the money they receive in exchange. Our government will never do that. No private enterprise will ever do that. And the Fed will not do that in a falling economy. And even if they tried, no one would buy that Fed debt during a recession or a depression.

So if Jim Sinclair is right, then the Fed is dead wrong that it can fight against any kind of a currency event. And a currency event is exactly what is being planned by the rest of the world in the lead up to the G20.

Bernanke is being disingenuous when he talks about independence and his mandate to fight inflation. He is trying to sound like the ECB when it is convenient for him to do so. But he knows very well that HIS political mandate is and has been the economy and full employment of the people for a long time now. Those are two opposing mandates, fighting inflation and growing the economy.

As long as the economy is struggling, he can do NOTHING to fight inflation, even if we have a hyperinflationary collapse caused by the dollar's loss of reserve status.

Sincerely,
FOFOA

Martijn said...

Indeed, it does not look too good for the fed. Many of the comments ousted these days should however be seen in the light of G20 I believe. The players are trying to establish a position for the negotiations, and B. Printingpress has to somehow boost credibility of the dollar.
As for Max Keiser's comment about China's gold I do see some reason in that.

FOFOA said...

Martijn,

You said, "Many of the comments ousted these days should however be seen in the light of G20 I believe."

I think this is a very important observation you make. Perhaps everything that is happening today has something to do with the G20.

I used the term "rhetorical tool" twice in my previous comment. But what does this mean? Why does the Fed use a rhetorical tool like this?

He is saying, "Don't worry about inflation, I've got it all under control. I can reverse ANYTHING when the time comes, because I am Helicopter Man!" As he rips open his shirt exposing a big red "H" on his spandex underwear.

He is putting out this message so the markets don't fear his printing. And also, so that the rest of the world will undress and crawl in bed with him for the grand monetary orgy. His invitation won't work, but at least he tried.

FOFOA

Martijn said...

Haha, yes indeed. Was laughing a lot when I imagined Bernanke ripping open his shirt revealing the H.

FOFOA said...

Martijn,

Interesting discussion on that video.

Max is referring to the World Gold Council official accounting of CB gold when he says that China has 600 tonnes of gold. These numbers are based on voluntary reporting by the members.

If you go to the Wikipedia page, you will notice that China is the only country in the world with a nice clean number reported... 600.0 metric tonnes. All the other countries have reported fractional numbers like 765.2.

While you are there, you can click on the History tab at the top, and then go to the oldest version of the page, which happens to be back in 2004. You will notice that the numbers haven't changed much. In fact, China hasn't changed at all.

Remember, China recently announced it's desire to obtain 4,000 tonnes of gold.

Back in 1998 Another talked a lot about China accumulating a lot of gold through back channels that would not affect the price or show up on official records. According to Another, the special ongoing deal between the dollar faction (US and UK) and the Middle East oil producers was noticed by China. And China wanted in on this deal. Here are a few references by Another...

Sir, Some think my thoughts are as "hogwash"? Several CBs use "agents" to buy gold. Some agents, small, some large, some "BIG". They buy much from $365 down, all last year. Even today, it does not show. This world, it is strange, yes? I would say "Big Trader" has little time for "washing the hog"! But you sir have a large shovel and dig very deep!

It is written, "all holes in earth lead to china"!


Any nation/state can put it's economy/currency on a gold standard. They only have two requirements. Own a stockpile of gold and raise the price very high!

In the past, when currencies were gold, a nation could not lower the amount of gold backing it's currency ( raise the price of gold ) because it lowered the currency unit worldwide and created payment imbalances. Today, no nation/currency is on a gold standard. The first country that starts will own the rest for some time.

Find me a country with many needed resources, little debt in relation to the assets and a national pride to lead? Let them price gold at many thousands not only in their currency but also in their resources! The world would buy from them, cheaply in gold but dearly in all other unbacked currencies. The markets would do the rest!

The large modern currencies, of today have only debt ridden economies to back them. They cannot change as debt blocks their path. "To change is to live and to live, some debts must die". The owners of much of this debt must lose if change is to occur. Even the new EURO will not be backed by gold! It will HOLD gold only as insurance against the worst outcome, war.

Yes, an oil state comes to mind! It could even be China!


I think, China was buying a great deal of gold and gold commitments ( paper gold ) thru a HK trader. They became much of the "not enough physical gold " problem for the oil/gold trade. China dumped much of this paper and continued to take in gold even today. Japan is a story of "no happy ending" as they are seen as "not aligned with Europe" or the BIS way of things. The EURO may send Japan down with the USA dollar! Asia will be lead by China, as they do understand a "Euro world". The ECB does know that "all holes in earth, lead to china"!


They brought the Chinese onto their side by neutralizing the rest of the Asian competition. China hates Japan and would like nothing better than to watch them die as they stick with the US and the dollar. China also picked up huge gold holdings these last few years with the help of the BIS. They will easily fit into the Euro world and enjoy a massive trading block with Europe!


Sir, I feel he is correct in this thought. Europe does grasp for a relationship with Asia as the US did have with the Japan. It would build a mighty economy on a foundation of oil and gold as backing for new money. As China and Arabia was once a part of the Europe economy, in a small way. They may now return with no fear of Russia. Britain? A lost nation. Japan? This one is "of the American Economy" and is to live and die by it! They will seek your Alaska oil before loss of face with gold. A dead Yen be a dead Japan.


Mr. Powell, In China, persons own gold for reasons that reach far from the past. They see the price of gold, in dollar and Yaun terms, not as gold value rising or falling but as these currencies rising or falling. As such, gold is viewed as "the stable wealth" and currencies as the "changing asset value"! Not unlike the Dow Jones stocks, always moving, so it is of the paper currencies of today. . Much is written of how gold does not come to China, as it is "expensive" and "citizens have no money to buy"! I say, they have money, just not your paper money, as they were taking in gold from before the birth of currency and will do so till the end of time! In that country, China, where gold was purchased in great quantities, from before the existence of America, this will not change if the Yuan is devalued.

What will change is the currency China uses in world trade. They have yet to "secure" the Euro against their US dollars held in Hong Kong. They will make this trade for the benefit of their "old trading partners" that ended with the "Orient Express"! If traders sell gold as the Yuan is devalued, I think that gold will ride this train route to Berlin, Yes?


Poland and China are good customers for the BIS. This is real physical gold they are taking out of circulation, not the pay me back when you have a chance lease deals. They really do have the IMF/Dollar countries over the barrel. Under these conditions it's easy for them to drain the Canadian gold reserves. Soon, these goldless countries will be left with nothing but high yield US dollar treasury notes. Later, when new issues of this paper is yielding 15%-20% these Central Banks will wish for the day when they held an assetthat offered no return! Gold!

The world currency crisis is heading for resolution. I think most of the reallocation of reserve assets is complete. Now the war can commence. The Dollar NEEDS a lower gold price to keep it up. London tried to use the Russian gold story as an excuse to send it down. My understanding is that whatever collateral was freed up from the USSR , the BIS picked up for others. It left the brokers selling leases for almost nothing or 1/2% or so. No one was buying them so the rate just fell on no volume. This was a lucky move for them as the perception was that massive sales were taking place. I don't think the BIS wants to be seen as a currency destroyer so they are doing the buying quietly.


Sincerely,
FOFOA

Martijn said...

Quite interesting indeed. The plot thinkens..
Funny how Max Keiser, who has also been talking quite a lot about gold for the past years, does only mention China's official reserve.

Anonymous said...

Hi FOFOA,

This has been released by the Comptroller of the Currency:

http://www.occ.gov/ftp/release/2009-34a.pdf

Page 25:

Goldman Sachs is Leveraged 1000:1

The top 5 banks have 200 Trillion in Derivatives. Gold manipulation by these cartels could come to an end eventually as forecasted by Jim Willie, Deepcaster, GATA, Jim Sinclair, and others.

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